Eurozone inflation eased to 2.5% in June, meeting expectations and sparking hopes for ECB rate cuts
Eurozone inflation in June came in at 2.5%, slightly down from the previous month’s 2.6%, according to Eurostat. This decline was in line with economists’ predictions and raised expectations for potential interest rate cuts by the European Central Bank (ECB). The main drivers of inflation were services, food, alcohol, and tobacco, while core inflation excluding food and energy also dropped slightly.
Belgium saw its inflation reach a 10-month high of 5.5%, while Germany experienced a decline. Other countries in the eurozone such as the Netherlands, Italy, Finland, Latvia, and Lithuania also saw increases in inflation rates.
ECB President Christine Lagarde emphasized the central bank’s continued efforts to combat inflation, stating that there are still uncertainties that need to be monitored. Market reactions following the inflation data included a slight increase in the likelihood of an ECB rate cut in September and a decline in the value of the euro against the dollar.
European stocks fell following the inflation data release, with the Euro Stoxx 50, German DAX, and French CAC 40 all experiencing declines. Madrid’s IBEX 35 index lagged behind due to poor risk sentiment. Companies such as Munich RE, Bayer, and Banco Santander were among the laggards in the European stock market. The overall outlook for the eurozone suggests a cautious approach as policymakers aim to stabilize inflation and support economic recovery.
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